Silicon Sees Schizophrenic Forecast

SAN JOSE, Calif. — Economically, the semiconductor industry is headed for good times as the global economy pulls out of prolonged recession led by slow growth in Europe. Technologically, chip vendors are facing challenges that ultimately could undermine their business model.

That was the appropriately schizophrenic forecast offered by Bill McClean, president of IC Insights, in his annual fall forecast here. "In general the trend for growth in semiconductors will improve in the next 10 years," McClean said.

Overall, he expects in the current 10 years a consolidating chip sector could see 8 percent growth and flat to slightly positive average selling prices. That's significantly better than the 4.7 percent growth and 3 percent ASP declines of the past decade.

Specifically, McClean forecasts market growth will nudge up to 11 percent and 13 percent in 2015 and 2016, largely on rising worldwide GDP growth. He also pegged the next down cycle of the semiconductor industry will start in 2017.

McClean sees better days for chips thanks to rising global GDP.

McClean said he believes the industry as a whole will continue to lower costs per transistor over the next five years despite steep technical challenges. However, he suggested all bets are off at the 10nm level when the industry adopts extreme ultraviolet (EUV) lithography and 450mm wafers.

"To get to 10nm we are already planning on playing tricks with EUV and we don't even have EUV in place," he said. "I've been through debates about getting to submicron, but this seems more real to me," said McClean who has tracked the industry since the 1980s.

Rising transistor costs would undermine systems sales based on traditional replacement cycles that anticipate significantly cheaper, faster systems every two years.

"The whole infrastructure behind electronics systems sales could fall away -- that's definitely a possibility," McClean said. "I don’t know exactly what's going to happen when, but it’s a negative and they only question is how negative is it," he said.

Members of an elite audience of industry forecasters at his presentation here disagreed. As chip makers start using double-patterned lithography at 20nm and beyond, cost per transistor are already going up, said a representative of Globalfoundries here. But those costs can be mitigated by smart use of design features such as FinFETs and system partitioning.

In foils on the following pages, McClean provided details on his forecasts, including an in-depth look at China which remains for the foreseeable future a big force is using and a small forcing in making chips, he said.

@EE: There's been some fear in Silicon Valley and the US in general of China growing to dominate electronics as Japan nearly did in the 1980s but given McClean's analysis here it looks like there's no danger of that happening in semi in the foreseeable future